Umiaq is defined as a large open Inuit or Eskimo boat made of skins stretched on a wooden frame, usually propelled by paddles. I looked it up only because my Words with Friends opponent just played that word. There are several possible explanations for this move. Maybe my friend of many years has recently become an expert in the Inuit culture. Maybe his linguistic genius is finally starting to gel, although that seems unlikely after years of unexceptional Scrabble play. Or more likely, he randomly guessed over and over until something was accepted. Much has been made about “plugging”, the practice of guessing randomly until you stumble upon a word. To a Scrabble purist like me, this is cheating, pure and simple. To seemingly everyone else, this is just part of the game and I need to shut up and stop being a sore loser. My point here is not to rant about the game. My point is that, for better or worse, sometimes your strategic competitive environment changes. Your favorite political party loses. Your competitors merge. Technology enables your customers to replace your cash cow service for free. A small new competitor comes up with a disruptive new technology that changes the rules in your industry. This seems almost unfair in the strategic planning and management world because you spend so much time and energy designing and executing a comprehensive strategy around certain assumptions. Just when you think that the initiatives that you are implementing are closing the gaps on your targets, the rules change and you find yourself on the Blackberry end of the iPhone revolution. There are a few guidelines you can follow to make sure that this doesn’t happen. First, don’t skimp on your external environmental scan during the Assessment step and be sure to go back and update that analysis periodically. Some of us work in industries that change abruptly from quarter to quarter, but in most industries, change happens gradually enough that an annual update will be adequate. Second, use scenario planning to help identify strategy alternatives. Scenario planning helps recognize the many factors that combine in complex ways to affect future success, and tries to make sense of how these factors interact and how they drive change, leading to a deeper discussion on better business strategies. Finally, sometimes planners get too attached to their product and have to be reminded that a dynamic strategy needs to be continuously evaluated to enable the organization to nimbly adapt and change. Evaluation helps organizations understand how well strategies accomplish desired results and how well the strategic management system improves communications, alignment and performance. A more formal evaluation process is usually conducted once a year, although if your organization is in a sector that changes more rapidly than that, more frequent evaluations are needed. If I don’t like plugging in Words with Friends, I can simply stop playing out of principle. But if my livelihood depends on my ability to adapt to a changing world, I have to be able to quickly and systematically adapt my strategy.  If I am too stuck in my ways, my organization will have a serious problem.  Sort of like being in an umiaq without a paddle. For more about how to adapt your strategy to a changing world, see The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

Have you heard the common legend that scientists have proven that bumblebees, in terms  of aerodynamics, can’t fly?  This is a myth that came about because about eighty years ago an aerodynamicist made this statement based on an assumption that the bees’ wings were a smooth plane.  It was reported by the media before the aerodynamicist actually looked at the wing under a microscope and found that the assumption was incorrect.  While the scientist and the media issued retractions, the legend lives on.

Unfortunately, in the management world, decisions are made every day based on “legends” rather than on real evidence. At a manufacturing company I once worked for, it was a well-known “fact” that it was more profitable to discount prices to increase volume in a particular market.  Even after a team of business managers proved discounting was a money loser, certain sales managers continued to rigorously advocate for the discount strategy for years.  I like to refer to any ongoing argument like this as the “Fight” of the Bumblebee.  This fight is the most difficult when the bumblebee argument is emotionally compelling (they’re not supposed to be able to fly!) and the truth is difficult to convey (bumblebees’ wings encounter dynamic stall in every oscillation cycle, whatever that means). Everyone loves a discount and can see pallets of product going out the door.  Not everyone understands some of the indirect nuances that contribute to profit.

Winning the fight of the bumblebee is dependent on making sure that you are interpreting, visualizing, and reporting performance information in a meaningful way.  People have to be trained to appreciate the difference between gut instinct and data-driven decision making.  Once they see analysis done well a couple of times, they will start asking for it.

The key to interpreting a measurement is comparison. And the trick is to display the information in a way that effectively answers the question, Compared to what?  Visualizing performance over time identifies trends that show data direction and development and provide context for the underlying story relative to strategy. The simplest and most effective way I’ve seen for consistently visualizing data is with a Smart Chart (or XmR chart), a tool showing the natural variation in performance data.

Once you have a better idea of how to interpret your data, reporting the information in a way that is meaningful is important.  Reports should always be structured around strategy, so that people have the right context to understand what the data is about.  Reports should answer basic questions you need to know, such as what is our current level of performance?, why are we getting that result?, and what are we going to do next?

For more about how to interpret, visualize and report performance, see The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

One of the participants in a recent Balanced Scorecard Professional Certification workshop was struggling with the difference between Strategic Themes and Balanced Scorecard Perspectives. In fact, he fundamentally questioned the need for both. His argument was that Themes and Perspectives are essentially both focus areas of some sort. Finally, he asked that I show him how different restaurants would use the terms if they were to create a balanced scorecard.

His request actually proved to be a great teaching example. Different restaurants, because they are in roughly the same business, will use roughly the same four Perspective names. All restaurants have to hire and train cooks and other personnel, build or rent physical facilities and use technology of some sort (Organizational Capacity Perspective). All restaurants have to order, prepare, and serve food or otherwise provide a particular atmosphere / experience of some sort that depends heavily on efficient internal processes (Internal Process Perspective). All restaurants want to please customers of one segment or another (Customer Perspective) and they want to control costs and make money (Financial Perspective). Restaurants might tweak the names of these perspectives to match their specific culture, but the concepts will be the same.

It is in the Strategic Themes and the accompanying Strategic Results that the restaurants will likely be different. Strategic Themes are derived from each restaurant’s unique mission, vision, values and customer value proposition. One restaurant might specialize in Mexican cuisine and another Italian. One might deliver a low cost family experience while another might be focused on luxurious atmosphere and world class service. Maybe one is trying to grow into a worldwide franchise with thousands of stores that all look alike and another is trying to be the finest unique restaurant in New York City.

These differences in competitive positions will result in different strategies as represented by the Strategic Themes. For each Theme, there is a specific Strategic Result that the organization is trying to accomplish. Strategic Results define the desired outcome or goal of the Theme and indicate how we will know success within the Theme. Strategic Results are written in “end state” declarative language, like “we are number one or two in 20 geographic markets,” rather than describing future actions, e.g. “we will increase our marketing efforts”.

The point is that the organization’s business model determines what Perspective names you select and their sequencing for the strategy map. But the specific strategy that you want to implement to compete in your chosen marketplace determines which Themes you select. Together, Perspectives and Themes form the foundational framework for the resultant balanced scorecard.

For more on how to develop and manage strategy using Themes, Results, and Perspectives, please see The Institute Way – Simplify Strategic Planning and Management with the Balanced Scorecard.

I talked to a student from one of our classes over a year after the class to see how things were going, and she told me a long story about how they were still debating the exact wording of objective number 9.  I asked her if they had reached their targets on any key measures and she said that they were still tweaking the measurement data definition.  So a year after the class, they were still just thinking about how to get started! In our recent webinar, we named this as one of our Top Eight Strategic Management Horrors, dubbing it the Wheel of Doom.  This horror is where the strategic management team begins the strategy formulation and planning process and is never heard from again.  They wordsmith the mission and vision statements for weeks.  They argue for months about the SWOT analysis.  They change strategic themes four times.  They refine the strategy map for months and months, and so on, without ever moving on. So what is the solution?  How do you get the hamster off that wheel? My first recommendation is to set a deadline.  In other words, if you start your strategic planning effort on September 1, set a deadline of, say, October 31.  On that date, everyone should agree that we will no longer wordsmith strategy but will instead discuss our performance results.  We won’t have to have the entire system done, but we will have at least a couple of important measures in place so that we can discuss how we are performing versus our strategic objectives. The second thing that is critical to always remember the old saying that perfect is the enemy of good. None of this is written in stone.  Strategic planning is an iterative process and so implementing an 80% solution quickly is better than drawing out the process trying to create the perfect system.  It’s easier to maintain momentum if you can maintain high energy and move on quickly. The third recommendation is to keep it simple.  Remember you can’t do everything for everyone.  Be a brutal minimalist at each step of the way to keep the number of objectives and measures down.  Then when you start executing strategy, focus on just a few key focus areas to start. Focus on improving 1-3 key processes that will drive the highest priority gaps in performance. Finally, it seems like common sense for people that are good with action items, but some folks are intimidated by long term projects and so they never get going.  They literally don’t know where to start. For those of you that struggle with that, the first step is to take those long-term, complex initiatives and break them down into shorter-term tasks.  Then get started on the first task. For more on how to improve strategic planning and move on to strategy execution, see The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

The rock music industry in 1991 was in transition. The glam-rock and new wave music of the eighties was out and the industry had not yet settled on alternative rock and grunge as the iconic sound of the decade. And most shockingly, after almost forty years of fans preferring rock music to country music by a reliably constant percentage, sales figures were indicating that preferences were shifting from rock to country.  The industry made what seemed like a very logical assumption: the shift was obviously caused by the incredible crossover appeal of Country superstar Garth Brooks, who had recently taken the music industry by storm. They also took very predictable actions in response: several promising rock bands were dumped while resources were shifted to other country acts. In the short run, these actions seemed to reinforce the trend, with even more country music sales. But then something very strange happened: the sales numbers slowly drifted back to the exact pre-Garth Brooks percentages, with rock being preferred by the same percentage it had for decades. Industry analysts were left scratching their head. What just happened? What they found after some analysis was surprising. In March 1991, the industry began counting record sales using the Nielsen SoundScan system. Before that, sales were counted by calling stores across the U.S. to collect sales data – an incredibly ineffective collection method. Unfortunately, not all record stores were able to implement the SoundScan system immediately and continued using the old method for months or even years. On the other hand, one behemoth was online immediately: Wal-Mart. In the early days of SoundScan, every single time a Wal-Mart sales associate scanned a CD, it was counted by SoundScan and reordered, whereas record store sales (and reorders) were hit-and-miss. Here’s the thing that nobody had thought about before: in 1991, country music fans primarily bought their music from Wal-Mart and rock music fans primarily bought their music from record stores.  Once all of the record stores were online, it became clear that the appearance of a shift in preference was nothing more than a measurement data collection problem. The lesson to this story is that it is critical to resist the urge for a knee-jerk reaction to data such as dumping promising rock bands! There is a process discipline to performance analysis and improvement and the steps are simple. First, a Smart Chart should be used to make sure you are correctly interpreting the data. Then, a root-cause analysis is in order to understand why you are getting the results you are getting. This root cause analysis would have likely revealed the issue with the data in SoundScan being dominated by Wal-Mart sales. Finally, an improvement action plan is implemented and the results are monitored over time. To learn more about how to interpret, report and react to your performance data, see the KPI Professional Certification Workshop, or see The Institute Way: Simplify Strategic Planning and Management Using the Balanced Scorecard.